Asset Strategies International

The Oxford Club Communique
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The "Fourth Precious Metal" Is Ready to Soar
The Auto and Jewelry Industries Are Driving Demand - and Profits

by Michael Checkan, Advisory Panelist, The Oxford Club

Most precious metals investors know about gold and silver. Some even know about platinum. However, few know about the fourth precious metal - palladium. But that's about to change soon...

Platinum's "sister metal" is about to come on the scene as its prices soar, and with the advent of a new way to profit from this metal.

Both platinum and palladium share many of the same unique characteristics and properties. Namely, both are non-tarnishing, strong and naturally white metals.

They are equally rare and are mined together in less than a half-dozen regions around the world, with no near-term projects under development.

Each has a limited mine production of approximately 6.5 million ounces, which is a mere fraction of the approximate annual 104 million ounces of gold that is produced. In addition, platinum is 15 times rarer than gold, and palladium is about as scarce as platinum.

Presently, palladium is trading at $336 per ounce, while platinum is around $1,226 per ounce. These two metals have historically traded in a 2-to-1 range (platinum to palladium) prior to market disruption in 2000, when palladium surpassed platinum and spiked to all time highs of $1,075 per ounce.

Palladium's price difference with platinum and its limited supply, in combination with increasing demand for existing and new uses, creates a unique situation right now that's about to push palladium to new highs - and profits, for those who know how to play it...

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A Precious AND Industrial Metal
Palladium's primary use - more than 50% - is in the auto industry, where it is a key component in controlling exhaust emissions as mandated by more stringent standards for cars. These environmental standards must be considered when attempting to forecast future demand for platinum group metals.

It is estimated that by 2011, China alone will produce more than 8 million cars - double its current production. Now consider that each one will require a catalytic converter in order to meet its government's commitment to the Euro II standard.

Manufacturers are now confirming that with the massive price difference between platinum and palladium, most - if not all - are planning to switch to palladium for the converters. This will ultimately aid the long-term price appreciation for this white metal.

Palladium is also used in the dental, electronics, jewelry and chemical sectors. This past year witnessed an exponential increase in the use of palladium in the jewelry industry. No longer is it only being used in combination with gold to create white gold. Rather, consumers are seeking this alternative "pure" and naturally white precious metal to the significantly higher-priced platinum.

Volatility Equals Portfolio Power

Palladium is a volatile metal. And the mass investment market will often steer clear of investments whose prices tend to make large moves, in seemingly unpredictable ways.

But while it is good overall to reduce investment risk, informed investors recognize that assets with higher volatility and inverse correlations to other asset classes can significantly enhance overall portfolio returns, while reducing overall portfolio risk.

With a negative correlation to bonds and the S&P 500, palladium enhances the profile of the diversified portfolio. Because of the higher volatility, even a small amount of palladium packs considerable diversification power.

According to industry sources, the demand for palladium jewelry will continue to increase signifcantly in both China and Japan. In Japan, traditionally platinum jewelry is more popular than gold. But with the price of platinum so high, the consumer has been looking more and more at palladium.

One Way To Profit On This Soaring Metal
There's little doubt that palladium is set for a long-term run. As it reaches its historic 2-to-1 price ratio with platinum, investors may well pocket a handy 82% pop.

One of the ways I recommend playing this price appreciation is through palladium coins.

One-ounce palladium investment bars were first introduced into the U.S. market around 1980 by Engelhard Refineries.

These bars never caught on, nor did Australian Palladium Emu coins. However, in late 2005 for the first time, the Royal Canadian Mint introduced the Palladium Maple Leaf coin.

The one-ounce 99.95% pure, C$50 Palladium Maple Leaf coin is slowly becoming popular. The investors' awareness of the low current price for palladium, and the accessibility of the Palladium Maple Leaf coin are beginning to have an impact on the market.

With demand from the worldwide auto and jewelry industries mounting, these Maple Leafs are an important hedge against inflation and wealth protection vehicle for most portfolios. OC

Wealth Protection Panelist Michael Checkan is President of Asset Strategies International, Inc. (www.assetstrategies.com), based in Rockville, MD, specializing in the areas of precious metals, foreign currencies and overseas wealth protection. For more information, contact Michael at 800.831.0007 or e-mail him at assetsi@assetstrategies.com